The Bombay High Court is currently hearing a high-stakes dispute between Skoda Auto Volkswagen India and the Customs Department over alleged evasion of $1.4 billion in import duties. During Thursday’s hearing, the Customs Authority accused the German automaker of importing nearly complete cars as parts to avoid higher tariffs, urging the court to reject Volkswagen’s “victim card.”
Additional Solicitor General (ASG) N. Venkatraman, representing the Customs Authority, argued that Volkswagen’s Aurangabad plant imports 97.8% to 99.7% of car parts for models like Skoda, Audi, and Volkswagen. These parts, classified as “completely knocked down” (CKD) units, are taxed at 10% instead of the 30% duty applicable to fully built vehicles.
“Effectively, they’re importing entire cars in parts and assembling them here. This is not a case of local manufacturing but systemic duty evasion,” Venkatraman told the bench of Justices Burgess Colabawalla and Firdosh Pooniwalla.
The ASG highlighted that 10 major automakers, including Mercedes, BMW, Hyundai, and Maruti Suzuki, paid ₹71,230 crores in customs duties by correctly classifying CKD imports under the 30% bracket. Volkswagen, however, allegedly misdeclared its imports to pay lower duties.
“If ten companies follow the law, the eleventh cannot claim exemption. We’re only asking Volkswagen to comply like others,” Venkatraman stated, dismissing claims of unfair targeting.
The Customs Department clarified that Volkswagen’s Pune plant was not under scrutiny since it sources 90% of materials locally, with imports limited to 7–10%. In contrast, the Aurangabad facility relies overwhelmingly on imported parts, with only minor components like first-aid kits, cables, and door brackets sourced domestically.
“The Aurangabad plant merely assembles pre-consolidated kits. The real work happens in CKD centers abroad,” Venkatraman explained.
The bench questioned whether this process constituted “importing cars in disguise.” The court will continue hearing arguments on Friday, focusing on whether Volkswagen’s classification violates customs laws.
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The bench resumes proceedings on Friday, with the Customs Authority expected to submit further evidence.
